The Biden administration has laid out for the first time a set of principles that attempt to define how “high-integrity” carbon credits can play “a meaningful role” in helping cut greenhouse gas emissions and channelling “a significant amount of private capital” to combat climate change.

A 12-page policy document released by the US government on Tuesday includes provisions to ensure that carbon credit projects deliver real emission reductions, avoid harming local communities and encourage companies to decarbonise their own operations before buying offsets.

But it also recommends that businesses should be allowed to use carbon credits to cancel out some of the emissions generated by their suppliers and customers, known as “Scope 3”. A similar move by the board of the Science Based Targets initiative (SBTi), a leading arbiter of corporate net zero plans, sparked a major backlash from staff last month.

The US government guidelines are neither binding nor enforceable. However, proponents hope they will reinforce a number of ongoing initiatives led by carbon credit developers, buyers and green groups to raise standards and boost the role of carbon markets in climate and nature protection.

Troubled market

Polluting companies, including major fossil fuel producers and airlines, spent an estimated $1.7 billion last year on voluntary carbon offsets meant to compensate their direct emissions by funding climate-friendly activities elsewhere, such as planting trees or rolling out renewable energy sources.  

But a series of revelations questioning the environmental and social benefits claimed by some developers and users of carbon credits have dented confidence in the market.

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Scientific studies and investigative reports – including by Climate Home – have found that a growing number of projects failed to deliver the emission reductions promised. NGOs have also denounced instances of human rights abuse and environmental damage caused by carbon-offsetting activities.

“Voluntary carbon markets are a huge distraction and a waste of time and resources,” said Mohamed Adow, the Nairobi-based founder of the Power Shift Africa think-tank. “It’s sad to see politicians in the Global North desperately trying to find any way they can to avoid actually just cutting their carbon emissions,” he added.

Every tool needed

In its announcement, the US government acknowledged the shortcomings in voluntary carbon markets (VCMs), saying that “in too many instances” credits do not live up to the high standards required.

“For good reasons a lot of folks outside this room are skeptical,” National Climate Advisor Ali Zaidi told attendees at the policy launch in Washington. “[They are] scared off by news stories of things that went wrong and gloss of greenwash.”

US National Climate Advisor Ali Zaidi speaks during a press briefing at the White House in Washington, U.S., January 26, 2024. REUTERS/Julia Nikhinson

But, he added, that should not be seen as “an excuse to slow down but as an occasion to speed up” and do things better.

The Biden administration wants to be a leader in guiding “the development of VCMs toward high-quality and high-efficacy decarbonization actions”, the White House said. Its principles closely align with those of industry-led governance bodies that are trying to revamp the carbon market.

The Integrity Council for the Voluntary Carbon Market (ICVCM) is currently assessing project methodologies as part of its efforts to establish the first independent global benchmark for “high-integrity” carbon offsets, known as the “Core Carbon Principles”.

“We are in a climate emergency and we need every tool in the box to meet the 1.5°C [global warming] target,” said ICVCM Council Chair Annette Nazareth. “High-integrity carbon credits can mobilise private finance at scale for projects to reduce and remove billions of tonnes of emissions that would not otherwise be viable.”

Substitute for government aid

As most of the world’s largest carbon offsetting projects are based in the Global South, many rich governments view the market favourably as a way of getting dollars to developing nations without tapping into public budgets.

That is the case in the US where climate funding has fallen victim to political polarisation. President Joe Biden promised to increase international climate finance to over $11.4 billion per year by 2024. But Congress approved only a fraction of that as part of this year’s government budget: $1 billion of a spending package totalling $1.59 trillion.

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The White House’s Zaidi said voluntary carbon markets can move “mountains of capital” if their integrity is improved. Better regulation could expand the market from its current size of around $1.7 billion to $1.1 trillion by 2050, according to predictions by BloombergNEF. 

Gilles Dufrasne, global policy lead at Carbon Market Watch, told Climate Home the US government will need to “walk the talk and ensure that its promises of transparency and integrity are followed up by actions”.

“There is currently no public data to measure how much finance is flowing to climate action through carbon credits and how much is staying in the pockets of Global North intermediaries and consultants,” he added.

International negotiations

The US government is also a strong proponent of private sector-led carbon credit initiatives in international climate circles.

In discussions at the COP28 climate summit last year on setting the rules for a new carbon market governed by the United Nations, Washington championed what observers described as a “light-touch, no-frills” approach that could hand a prominent role to private-sector players from the voluntary market.

The move was rejected by the European Union, causing a breakdown in the negotiations, which will resume at the mid-year UN climate talks in Bonn starting next week.

“By undermining the multilateral process … and placing more faith in private sector-governed voluntary carbon markets, the US appears to be shirking its responsibilities for financing climate action and offloading them onto the private sector,” said Trishant Dev, a carbon market expert at the Delhi-based Centre for Science and Environment.

(Reporting by Matteo Civillini and Joe Lo; editing by Megan Rowling)

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Both governments announced several carbon offsetting deals at Cop28 in Dubai under the umbrella of the Paris Agreement’s bilateral carbon trading principles.

But the rules for how to implement them have yet to be agreed, as negotiations at Cop28 collapsed over discussions on how to ensure the integrity of carbon credits. Still, that hasn’t stopped deals such as Paraguay’s moving forward without clear guidelines.

Climate experts and organisations fear the lax rules approved by the Paraguayan government – as well as its proximity to industry players – risk the new UN mechanism repeating problems that have beset the voluntary carbon market, where companies have frequently ended up buying junk offsets.

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Despite such concerns, Paraguay has made carbon markets a top priority, even rushing to pass a new law in less than one month – between September and October 2023. The law created a national registry and a set of rules for every carbon project in the country.

It “will contribute enormously to the growth and development of the country”, said Minister of Environment Rolando de Barros Barreto, in an official statement the day the law was signed by President Peña.

De Barros Barreto was heavily involved in lobbying for the legislation to pass through Congress without modifications. “We are one of the few countries that have a tool like this,” he added in the statement.

A man fishes near chimneys giving off emissions in an industrial area of Singapore, January 5, 2016. (Photo/Reuters/Tim Wimborne

Carbon shopping

Pressed by a hike in Singapore’s domestic carbon tax – which will rise from about $3 per tonne to $18 in 2024 – its government went shopping for carbon offsets at Cop28 to offer big emitters back home. It held talks with Bhutan, Papua New Guinea and Paraguay as potential suppliers.

Paraguay – which, according to industry minister Javier Giménez García de Zúñiga, was seeking to position itself as the “lung market” of the world – landed an ideal customer.

Both countries agreed to create a bilateral commission to pick carbon-cutting projects in Paraguay. Companies based in Singapore could purchase credits from these projects in exchange for a discount on the new carbon tax rates. No official document on the deal has yet been disclosed.

“What was agreed is to create a road connecting the two countries to manage the transfer of carbon credits,” Giménez García de Zúñiga said in a statement published jointly by the two countries to mark the deal.

On the same day, President Peña also signed a memorandum of understanding with Cop28 host United Arab Emirates, which had embarked on its own controversial spending spree for carbon offsets, mainly in the form of agreements with African countries.

At COP28 in Dubai, Paraguay’s Minister Rolando de Barros Barreto and the UAE’s Mariam Almheiri sign a Memorandum of Understanding on carbon credits. (Photo: Paraguayan Presidency)

Rushed rules

In order to arrive at Cop28 as a reliable supplier of carbon offsets, the Paraguayan government rushed its law regulating carbon markets through both chambers of Congress in less than a month.

The initiative was marketed abroad by President Peña as “one of the most advanced laws in the world” and as a way to attract foreign investment. But it also has been heavily criticised by opposition lawmakers, academics, Indigenous peoples and environmental groups.

The new law passed without including safeguards to guarantee environmental and human rights based on an international standard that seeks “to mitigate the negative impacts of projects and, above all, to defend the rights of the people”, explained Mirta Pereira, a Paraguayan lawyer and advisor for the Federation for the Self-determination of Indigenous Peoples (FAPI).

Alberto Núñez, an activist from the Youth Network for Climate Action Paraguay, said in a public hearing prior to the bill’s approval that “without explicit human rights safeguards, this (law) will have a climate-friendly name but will be destructive”.

Opposition senators said it had been influenced by peddling to favour law firms that advise on carbon projects.

A proposal to create mechanisms for handling complaints, information requests and potential land conflicts was also rejected by Peña’s ruling bloc of lawmakers.

Protected forests

Another issue is that the new law allows for carbon projects to be set up within national parks and forest reserves, in an effort to finance the country’s protected areas, experts said.

But the forests in the concession areas would have already been protected without funding from the offsetting projects, which means their credits lack “additionality” in terms of emissions reductions, according to the standards recommended by the Integrity Council for the Voluntary Carbon Market (ICVCM), an independent body that seeks to raise the quality of carbon credits for trading.

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Inigo Wyburd, a researcher at non-profit organisation Carbon Market Watch, said “additionality is necessary” for Paraguay’s market to be credible. “It is important that it is reflected in the text of the law. Areas that are not at risk of being deforested should not be eligible to receive carbon credits,” he added.

Without such safeguards, carbon schemes – including the country’s bilateral offsetting deals – risk repeating the errors of the voluntary market, according to Carbon Market Watch policy analyst Jonathan Crook.

Forest projects whose offsets are traded in the voluntary market have been widely criticised for over-crediting emissions reductions, as well as struggling to monitor forest loss. In some cases, projects have also led to human rights violations, especially against Indigenous peoples.

Industry brokers in the room

In September, a few months before Singapore and Paraguay announced their deal, the two governments held a meeting in New York, attended by big carbon brokers likely to benefit from the agreement.

They included Singaporean commodities giant Trafigura Group, which is one of the world’s largest carbon traders and Paraguay’s biggest fossil fuel supplier.

Peña also met in New York with Per Olofsson, CEO of Paracel, a forestry company seeking to sell carbon credits from eucalyptus tree plantations in Paraguay, where Olofsson had joined meetings lobbying in favour of the new carbon markets bill.

Photograph of Paraguayan President Santiago Peña at a meeting in New York on September 20, 2023. The photograph shows Per Oloffson, CEO of Paracel, and Benjamin Chia, Singapore’s main carbon markets negotiator (second and second to last on the right, respectively). Chia’s attendance was not announced. (Photo: Paraguay Presidency)

Both Paracel and Trafigura have faced questions over the integrity of their carbon credits and had projects suspended by carbon credit verification agency Verra.

Trafigura faced problems in June 2023, when Verra launched an investigation into its Southern Cardamom project in Cambodia, after human rights groups raised concerns about land conflicts with Indigenous people.

Trafigura, which had already committed the credits to corporate buyers, had to suspend them. The results of the investigation have not yet been revealed.

Meanwhile, Paracel was also questioned last year by Verra, which suspended one of its projects aiming to generate carbon credits from a wood-pulp mill and eucalyptus plantations in Paraguay.

The project took a $200-million loan from the Inter-American Development Bank, which according to Verra, shows that the project had no additionality, since it would have accessed finance anyway and continued without selling carbon credits.

Excerpt from Verra’s letter denying registration of Paracel’s project

According to Verra, Paracel had until December 19, 2023, to present improvements and thus avoid a final rejection of the project. But as of March 1 this year, neither the company nor Verra had published updates regarding its status.

Paracel is also facing a dispute with a local community called Sargento José Félix López, in Paraguay’s northwest, which denounced the siting of some eucalyptus plantations on public land.

Asked about Verra’s concerns, a Paracel spokeperson said the company was gathering documentation to submit to Verra, noting that additionality was fundamental for its biggest international buyers.

Paraguay’s new carbon market law is a positive step towards regulating the local market, the spokesperson added.

Asked if that same law would be useful for international agreements, Rodrigo Maluff, vice minister of investment, said the door is still open to modify the legislation and adapt it to the standards demanded by Singapore.

The legal director of the Ministry of Environment, Víctor González, said much of the work could be done through the regulatory process under the law that will begin this year.

Transparency concerns

Experts told Climate Home that agreements like the Singapore-Paraguay deal could be negatively affected by the failure of governments at Cop28 to reach a consensus on rules for the new bilateral carbon markets being discussed under the Paris Agreement’s Article 6.2.

One key element of discord at Cop28 was how robust the process to verify the quality of the credits should be.

Carbon credits talks collapse at Cop28 over integrity concerns

“More and more countries [like Paraguay] and companies are negotiating bilateral agreements, in the absence of comprehensive regulation,” said Crook from Carbon Market Watch.

“This risks undermining transparency and may make negotiations [at Cop29] even more difficult, given the absence of clear direction,” he added.

A longer version of this story was first published in Spanish by El Surtidor as part of the Opaque Carbon project led by the Latin American Centre for Investigative Journalism (CLIP) and bringing together 14 media outlets from Latin America.

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Last month, Shell used rice farming carbon credits to offset a chunk of its annual emissions, claiming to reduce the “carbon intensity” of its fossil fuel products.

But experts have long argued that the sellers of these offsets are over-counting their emissions reductions and using accounting tricks to evade checks, as a Climate Home investigation showed last year.

These accusations led leading carbon standard Verra to suspend the projects early last year and launch an investigation. Shell took them off its website as a result.

But, although Verra’s review continues, on January 9 Shell quietly retired over a million credits produced by the suspended projects, meaning it counts the claimed emissions reductions towards its climate targets.

Rachel Rose Jackson, director of climate policy at Corporate Accountability, said Shell’s actions were “shameful, dubious and reckless against the backdrop of a deadly climate emergency”.

“To retire over one million offsets from projects actively under investigation reeks of bad faith and malintent”, she added.

Carbon Market Watch’s Jonathan Crook said Shell should have at least waited until Verra’s review had ended to see if there were problems with the offsets.

If the offsets do have problems then, he added, they “have no value from a climate perspective and using them towards net carbon intensity targets is totally inappropriate”.

Shell did not reply to detailed questions on these particular offsets. But a spokesperson said that the credits the company buys are “certified in accordance with independent standards and further screened through our due diligence process”.

Claiming to lower rice emissions

The idea behind the projects is that emitters like Shell pay for Chinese rice farmers to take measures to reduce their emissions that they wouldn’t otherwise be able to afford.

Rice is traditionally grown in flooded fields known as paddies. These have more bacteria than dry fields and the bacteria breaks down decaying plants, turning them into a potent greenhouse gas called methane.

To reduce the damage to the climate and save water, the project developers claimed they would pay farmers to periodically drain their fields. With less standing water, there are fewer bacteria and less methane.

A rice field irrigated with alternate wetting and drying methods

But opinions from experts and scientific literature suggest that lots of farmers already employ this technique across China, encouraged by the central government. So they do not need incentives from carbon credit to do so.

Carbon credit rating agency BeZero Carbon has given a Chinese rice cultivation project similar to Shell’s its lowest possible score. 

Its assessment says there is a “significant risk” that the emissions reduction measures are not additional to what would happen without the carbon credit money “due to the high level of government support for the project activities”.

A Climate Home investigation last year found that the project developers artificially divided up fields across several projects to pass them off as small-scale and avoid stricter checks.

Quality issues

These activities were initially given the green light by leading carbon standard Verra. But early last year, in response to concerns, it identified “quality issues”, launched a review and stopped the projects from producing any more credits.

But the suspension did not prevent offsets already in circulation from being sold or used to offset emissions.

When Climate Home approached Shell last year, the company said it was aware of Verra’s review and “would look carefully at the results when they are published”. 

The company took the offsets off a webpage dedicated to its portfolio of carbon credits offered to external clients, with a spokesperson saying this was “pending Verra’s review”.

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Nearly a year later, the results of the review have still not been published and the projects remain on hold. But Shell retired 1.23 million carbon credits issued by those projects, offsetting emissions equivalent to three gas-fired power plants running for a year.

A Shell spokesperson said the company had “recently retired a number of carbon credits as part of our net carbon intensity target”.

Finding a way out

Shell’s involvement in these projects is not just as a buyer. The schemes were originally set up by a Chinese firm but four years later Shell signed a series of agreements to become its exclusive agent.

The role granted Shell the right to either claim the credits against its emissions or sell them to other companies, potentially profiting from their sale.

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Before Verra suspended the projects, only a quarter of the credits issued by the projects had been used, primarily by Chinese state-owned oil company PetroChina. 

Shell retired the vast majority of the remaining credits on January 9. Carbon Market Watch’s Crook says it would appear Shell “had sunk money into the projects and had these credits sitting on their books”.

“Perhaps they have not been able to find any buyers since the projects were put on hold”, he added. “Or perhaps they are doubting that the review will be positive and it will be difficult to sell or trade any of these credits in the future. So they went ahead and used them themselves”.

Shell involved in rule-making

While Verra probes the credits, it has taken the rare step of banning any further use of the rice farming methodology under which the projects were developed.

The register is now working on a new rulebook for future rice farming offsets. It says it will allow project developers “to credibly achieve emission reductions and generate high-quality credits”.

To advise them on this, Verra has appointed an Indian company which is part of Shell, raising concerns about conflict of interests.

Crook described this as a “recurring issue” in the carbon credit world. He said: “You have actors who wear all these different hats. They can sometimes develop methodologies, transact carbon credits and/or use them towards their own targets, potentially based on rules they helped develop. It raises real questions around conflicts of interest and integrity.”

A Shell petrol station. Photo credit: Tomcat MTL/Flickr

A Verra spokesperson told Climate Home it “takes potential and actual conflicts of interest very seriously” and that methodologies “undergo an extensive review process before they are finalised” and at each stage “all stakeholders, including the public, have an opportunity to evaluate and comment”. 

They said: “This process is designed to promptly identify any issues with the methodology, including the opportunity to identify any perceived conflicts of interest”.

Investigation ongoing

The spokesperson said Verra does not comment on specific projects under review to avoid influencing the outcome of the investigation.

“The steps in a review, as well as the timeline for completing the review, depend on the underlying facts and circumstances, the complexity of the issues, the cooperation of third parties and other factors”, they said.

“A review may take several weeks or months to complete,” they added, “while every review is different, Verra aims to conduct an appropriately scoped review as expeditiously as possible.”

A spokesperson for Shell said: “We retire credits to compensate emissions, including those associated with the energy our customers use in transport, homes, producing goods and providing services. This approach complements our activities to avoid and reduce emissions from our own operations”.

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The Societe Conservation Forestiere (SCF) was set up in December 2022 and is co-owned by two adult children of the DRC’s defence minister Jean-Pierre Bemba, who was accused of war crimes and found guilty of bribing witnesses. This is according to previously unreported company documents seen by Climate Home.

The documents show its stated goal is to sell carbon credits and it has applied to the provincial government for a “forest conservation concession” in the DRC province of Sud-Ubangi but it has not made progress on the ground and little else is known about it.

Anti-corruption activists raised concerns that Bemba could use his political power over the environment minister Eve Bazaiba, as her party leader, to benefit the company. Human rights activists criticised the war crimes committed by Bemba’s forces across Central Africa.

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Carbon Market Watch researcher Jonathan Crook said the revelations raised “red flags” over whether the company is free from conflicts of interest and has the experience to conduct forest conservation projects that get informed consent from local peoples.

He added: “It is very concerning to hear of potentially significant conflicts of interest and serious allegations of human and land right abuses reported about individuals linked to this company”.

Bemba was charged with war crimes and crimes against humanity but, after a 10-year trial at the International Criminal Court, he was eventually acquitted on appeal. He was found guilty of bribing witnesses in the case.

Ban on business

The documents show SCF’s shares are owned equally by Bemba’s 30-year old son Jean-Emmanuel Teixera and 29-year old daughter Magalie Tema Teixera. They are listed under their mother’s last name and as Portugese citizens.

The SCF’s constiution

Article 97 of the DRC’s constitution bans government ministers from carrying out “any professional activity”.

Jimmy Kande is an anti-corruption activist from the DRC. He told Climate Home that the country’s politicians often put projects in the names of their children.

Kande told Climate Home that this company may find it easy to get the support of the environment minister because she “depends on Jean-Pierre Bemba”.

Neither child has any track record of forest conservation and both remain close to their father. Magalie goes by Magalie Bemba on social media and re-posts her father’s messages praising his militia turned political party – the Movement for the Liberation of the Congo (MLC).

Jean-Emmanuel’s recent wedding was attended by his father, the president of the DRC Felix Tshisekedi and Laurent Gbagbo, the former president of the Ivory Coast who Jean-Pierre Bemba met whilst they were both on trial for alleged war crimes in The Hague.

A power player

Jean-Pierre Bemba was born into extreme wealth and power. His father was a minister under the DRC’s long-time dictator Mobutu Sese Seko.

When the DRC descended into wars which would end Mobutu’s rule, Bemba set up the MLC as a rebel militia and took control of almost a third of the country.

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Human rights groups have accused them of raping and massacring and indigenous pygmy people during these wars.

In 2003, the warring factions signed a peace agreement which made Bemba one of five vice-presidents in the transitional government.

Three years later, Bemba was the main challenger to Joseph Kabila in presidential elections. The electoral commission declared Kabila the winner.

War crimes

The next year, on a trip to Belgium, Bemba was arrested on the orders of the International Criminal Court.

Their arrest warrant says he was suspected of perpetrating crimes against humanity and war crimes, particularly allowing his MLC troops to rape, murder and pillage during a conflict in the Central African Republic (CAR). In 2002, MLC fighters interceded to suppress a coup attempt against CAR president Ange-Félix Patassé.

Witnesseses told the court that civilians were murdered when they tried to stop their property being stolen. The thefts were “not justified by military necessity”, the ICC ruled.

In 2016, three different ICC judges found Bemba guilty of war crimes and crimes against humanity, namely the murder, rape and pillage committed by MLC fighters.

The three judges which declared Bemba guilty in 2016 (Photos: International Criminal Court)

While human rights groups celebrated the decision, then-MLC legislator Bazaiba called it “selective justice”. Bemba immeditately appealed. Two years later, a panel of five brand new judges narrowly reversed the decision, arguing the previous judges failed to properly prove that Bemba had the power to stop the war crimes.

The ruling was enough to free Bemba from prison in time for him to return to the DRC and try to run for president in the 2018 elections.

But the electoral authorities banned him from running because, while the ICC failed to convict him for war crimes and crimes against humanity, it did find him guilty of bribing witnesses in the trial.

The elections were won by Felix Tshisekedi, who sought to bring rivals from the MLC into his coalition.

He appointed the MLC’s secretary general Eve Baziaba as environment minister in April 2021 and Bemba as defence minister in March 2023.

The MLC’s support helped Tshisekedi win a second term in office last month and he is likely to keep both Bemba and Bazaiba as ministers.

Carbon offsets supporter

Since her appointment as environment minister, Bazaiba has been a vocal supporter of carbon offsets at Cop climate talks.

At Cop28, UN records show she was accompanied by her own daughter Nono Manganza and by Jean-Pierre Bemba’s eldest daughter Cynthia Bemba-Gombo.

At the conference, she stood alongside indigenous people from around the world and argued: “The world asks us – Amazonia, Congo Basin, Mekong basin – to preserve our forests. But to do this means adaptation of our lives, our agriculture, of everything”.

“And this adaptation needs funds,” she added, “so, we say OK, and we entered the carbon markets.

But back home, Greenpeace Africa have accused her of encouraging land-grabbing after she signed a mission order telling a team to “arracher” (which translates as “wrest”) consent from local communities for a carbon offset programme.

At the time, Greenpeace campaigner Irene Wabiwa accused her of “demonstrat[ing] contempt for Congolese law, civil society and the rights of local communities”.

Human Rights Watch researcher Thomas Fessy said “it’s easy to suspect that Bemba’s family – particularly at a time when a close political ally is at the helm of the environment ministry – has seen a business opportunity in a field that relatively new to Congo”.

The DRC is home to a twentieth of the world’s forest and polluting companies are expected be buying $10-40 billion a year of carbon offsets by 2030.

Magalie Bemba, Eve Bazaiba and the government of the DRC did not respond to requests for comment.

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It sounds like a a win-win. A company gets a step closer to telling its investors and consumers it’s reached net zero, and critical forest protection gets an injection of cash.

These days, forests generate a lot of credits: they represent one in three carbon credits sold through Verra, the largest of the voluntary carbon market administrators. 

But this market is plagued with problems. It routinely inflates its climate impact, diverts money to middlemen who cream off profits, and exploits Indigenous communities. High-profile investigations have exposed widespread malpractice. 

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That scrutiny should not stop, because the most dangerous element of exploiting forests for carbon credits still exists: businesses buy credits as a shortcut to meet their net zero targets while continuing to pump out emissions.

Forest offsets, no matter how incredible trees’ role in tackling climate change is, are simply not equivalent to cutting emissions: storing carbon in trees isn’t always a long-term bet to keep carbon out of the atmosphere.

Deforestation, decay, or fire (as we have recently seen in Canada) can release it back into the atmosphere within hours. The only sure way to slow down climate change and meet net zero goals is to keep coal, oil and gas in the ground.   

To understand the risks of forest carbon credits being sold as offsets, take a look at Guyana: a story of zombie carbon credits, dubious accounting, and a cosy relationship between offset schemes and the oil industry. 

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Guyana’s story begins with a calculated overstatement of the risk of deforestation. A report written by McKinsey in 2009 claimed that the country’s forests could disappear at a rate of more than 4% per year, gone entirely within 25 years.

Independent assessments show that the true rate of deforestation was actually around 0.2%. But the inflated McKinsey estimate had already established an attention-grabbing baseline number that would set the project up to report an impressive – but false – impact.   

In a deal set up with the Norwegian government, Guyana received four payments totalling nearly $200 million for ‘avoided deforestation’. Recently, Guyana sold 33.5 million carbon credits for reducing forest loss during 2016 and 2020, this time under an ART-TREEs crediting scheme.   

But analysis of the methodology used shows that, as with previous payments to Guyana, the ‘emissions reductions’ may be largely fictitious. According to one analysis, some 84% of these credits were created by accounting manipulations allowed under the scheme.

Independent evidence also suggests deforestation actually rose during the crediting period. Data from the independent Global Forest Watch shows that forest loss in four of the five years was higher than in all the years the analysis looked at. 

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Meanwhile, the Amerindian Peoples Association, which defends the rights of Guyanese Indigenous Peoples, said that there hadn’t been proper consultation about the programme with people with ancestral rights to land. 

Astonishingly, this project – which allowed deforestation to rise, and more carbon to be released into the atmosphere – was used to greenwash oil drilling off Guyana’s coast. The Hess Corporation, which has a 30% stake in a deal exploiting oil from Guyana’s recently-opened Starbroek offshore oil block, announced its intention to buy $750 million of credits generated by Guyana forest projects to offset its emissions.

But in comparison to the 33 million tonnes of carbon supposedly captured by the scheme so far, the oilfield could, over its lifetime, release up to 5.5 billion tonnes of carbon. That’s 166 times as much. 

A race to the bottom of offset standards permitted the creation of millions of ‘zombie carbon credits’ used to justify oil drilling.  

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But can we blame forest nations for looking to exploit a promising source of finance? For decades emerging economies dense in essential biodiversity have faced promises of critical finance from the global north to protect and restore rainforests – the lungs of the earth and the only tried and tested method for removing carbon from the atmosphere.

A $711 billion a year funding gap currently exists for nature protection and restoration, with $200 billion of that needing to be new sources of finance outside of repurposing existing subsidies that could be channelled in better directions.  

In the run up to Cop28 we’re seeing countries and continents rich in carbon storing biodiversity come together – through the Amazon Summit, Africa Climate Summit and Three Basins Summit all before COP28 –  to renegotiate what those financing solutions should look like.  

Now is the time to turn away from the small piece of the funding pie failing carbon markets represent and focus energy on real solutions that really have forests, people and the climate at their heart.  

On its website, ART TREES says credits created under its HFLD methodology “constitute additional climate action” and “incentivises jurisdictions to protect intact forests since guarding the carbon sequesterd in these forests is essential to meeting the goals of the Paris Agreement”

Joe Eisen is the executive director of the Rainforest Foundation UK

This story was was edited on August 21, 2023, to correct the role of the Amerindian Peoples Association as a defender of indigenous rights in Guyana, but not a legal representative of them.

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